Where Are Merchant Stocks Going in the Short Term?
Independent power producer NRG Energy (NRG) has been on a gaining spree in the last few trading sessions. On January 11, 2017, the stock was trading at a 17% and 7% premium to its 50-day and 200-day moving averages, respectively. These levels may now act as a support in the short term. The stock may remain strong until it breaks below these moving average levels.
Moving averages show that when a stock rises above a particular moving average, it’s a bullish sign. When it falls below that average, it’s bearish.
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NRG’s RSI is at concerning levels
Currently, NRG Energy’s RSI (relative strength index) stands at 80.5. The RSI is a momentum indicator made up of values between zero and 100. Movements below 30 are considered to be in the “oversold” zone. Movements above 70 are considered to be in the “overbought” zone and can hint at an imminent reversal in the stock’s price.
On January 11, 2017, Dynegy (DYN) was trading at an 11% premium and a 28% discount to its 50-day and 200-day moving averages, respectively. Its RSI was at 74.
By comparison, Calpine (CPN) was trading at a 5% premium and a 9% discount to its 50-day and 200-day moving averages, respectively. Its RSI was at 67.
Is it the right time to enter these stocks at these levels? In the next article, we’ll look at how they are valued currently.